#Obama’s Rebalance

[alewaanewspaper1960]

الخطابات والممارسات الأمريكية تجاه منطقة المحيطين الهندي والهادئ - من أوباما إلى بايدن (منظور بنائي)

الخطابات والممارسات الأمريكية تجاه منطقة المحيطين الهندي والهادئ – من أوباما إلى بايدن (منظور بنائي)   الخطابات والممارسات الأمريكية تجاه منطقة المحيطين الهندي والهادئ – من أوباما إلى بايدن (منظور بنائي) المؤلف: Nourhan Aboelfadl المستخلص: تطورت استراتيجية الولايات المتحدة لإعادة التوازن نحو آسيا بشكل جوهري، خاصةً في ظل تغير للتحالفات الإقليمية في المنطقة. ولذلك يستدعي التوجه الأمريكي المتقلب…

[amereid1960]

الخطابات والممارسات الأمريكية تجاه منطقة المحيطين الهندي والهادئ - من أوباما إلى بايدن (منظور بنائي)

الخطابات والممارسات الأمريكية تجاه منطقة المحيطين الهندي والهادئ – من أوباما إلى بايدن (منظور بنائي)   الخطابات والممارسات الأمريكية تجاه منطقة المحيطين الهندي والهادئ – من أوباما إلى بايدن (منظور بنائي) المؤلف: Nourhan Aboelfadl المستخلص: تطورت استراتيجية الولايات المتحدة لإعادة التوازن نحو آسيا بشكل جوهري، خاصةً في ظل تغير للتحالفات الإقليمية في المنطقة. ولذلك يستدعي التوجه الأمريكي المتقلب…

[mariacallous]

When Donald Trump first ran for the U.S. presidency in 2016, a wave of writing suggested that he was a realist. In this framing, Democratic Party candidate Hillary Clinton was presented as a neoconservative hawk who would start wars. Trump, by contrast, would balance U.S. commitments with its resources. He would avoid foreign conflicts and quagmires. He would be less ideological in his approach to nondemocratic states.

In 2024, this thinking has returned. Some realist voices are again suggesting that Trump is one of them. Trump’s desire to end the war in Ukraine—even though he simply intends to let Russia win—is taken as evidence of this. So is the selection of Ohio Sen. J.D. Vance as his vice presidential candidate. Vance has famously said that he does not care what happens to Ukraine. Conversely, he is a China hawk who seems to believe the United States cannot support both Taiwan and Ukraine simultaneously.

The notion that U.S. support for Taiwan and Ukraine is a trade-off is the most controversial component of the Trump realist position. Former Defense Department official Elbridge Colby, for example, has argued prominently that U.S. support for Ukraine undercuts its ability to help Taiwan, and that Europe should be almost exclusively responsible for helping Ukraine (or not).

But these hopes are badly misplaced. A second Trump term may well take an entirely different tack on China from the hawks—and even if he wants to move against Beijing, he lacks the discipline and ability to do so.

There is far more in Trump’s first term to suggest indiscipline, showboating, and influence-peddling than the clear-eyed, bloodless calculation of national interest that realists aspire to.

On China, Trump was undisciplined and sloppy. Yes, he turned against China in 2020, during the final year of his term, but that was more to deflect blame for COVID-19 than out of any realist or strategic reappraisal of U.S.-China relations. COVID-19 suddenly became the “kung flu” in Trump’s vernacular in an openly racist bid to change the subject.

Trump also undercut any ostensible focus on China by picking unnecessary fights with the United States’ regional partners. U.S.-South Korea and U.S.-Australia relations, for example, sank to their lowest point in years as Trump picked fights with their leaders because he wanted a payoff for the U.S. alliance guarantees.

Realism values allies for their ability to share burdens, project power, and generate global coalitions. Trump does not seem to grasp that at all. When Trump backed off his criticism of Japan, the turning point was apparently then-Prime Minister Shinzo Abe’s relentless flattery, including giving Trump a gold-plated golf club, rather than any strategic reevaluation by Trump or his team. Such frippery is exactly the opposite of the cold calculation that we associate with realism.

Trump also sank the Trans-Pacific Partnership (TPP) and all but dropped earlier U.S. rhetoric about a pivot or rebalance to Asia. Were China a threat that Trump took seriously, then building a tighter trade area among the United States’ Asian partners would be a smart move to pool local allied economic power and build patterns of administrative coordination among those partners. Indeed, that was the rationale behind TPP and the “pivot” to increased engagement in the Indo-Pacific when it was proposed by the Barack Obama administration. Trump did not see that, either; he is obsessed with imposing tariffs, even against allies, which violates the realist tenets that concern allied power accumulation and coordination against shared threats.

Finally, Trump’s admiration for Chinese President Xi Jinping’s autocracy was blatant, and Trump has once again recently praised Xi as his “good friend.” The former U.S. president has spoken approvingly of China’s crackdowns in Tiananmen Square, Xinjiang, and Hong Kong. He solicited Chinese help in the 2020 election, and China happily channeled money to Trump’s family and his properties during his presidency.

Trump clearly craves authoritarian powers at home and is happy to take China’s money. He was happy to pardon Republican lobbyist Elliott Broidy, who was convicted for illicitly acting on Beijing’s behalf. It stretches credulity to suggest that Trump will lead the United States, much less an Indo-Pacific coalition, in a major shift against a power that he admires. China will probably just throw money at him if he is reelected—especially after seeing his U-turn on a TikTok ban, a policy that he backed in his first term but failed to deliver on, after facing pressure from billionaire TikTok investor Jeff Yass.

Little else in Trump’s first term suggests s a thoughtful, realist weighing of priorities: Trump’s most important first-term foreign-policy venture was the attempted denuclearization of North Korea. Unsurprisingly, that effort was amateurish, sloppy, and unplanned—and it failed.

There is a realist argument for reaching out to Pyongyang. The United States’ long-standing policy of containment and deterrence has not changed North Korea, nor did it prevent its nuclearization. North Korea is now a direct nuclear threat to the U.S. mainland. A realistic foreign policy would accept that as an unchangeable fact and react to it. Perhaps a bold move by a risk-taking statesman could break the logjam.

Trump might have had the chance to pull this off, but he failed due to his own lack of discipline. Trump did not prepare for his meetings with North Korean dictator Kim Jong Un; instead, he simply walked off the plane and thought his New York tough guy shtick would somehow bowl over a man raised in the crucible of North Korea’s lethal family politics. There was no interagency process to build proposals ahead of time, nor any kind of realistic, measured deal that could have won over Pyongyang.

According to John Bolton, then Trump’s national security advisor, the president did not even read in preparation for the summits. Instead, Trump demanded the complete, verifiable, and irreversible nuclear disarmament of North Korea in exchange for sanctions removal, then walked out of the Hanoi summit when Pyongyang predictably rejected this wildly unbalanced so-called deal. Talks collapsed because Trump had not prepared and had no idea how to bargain on the issues when his first offer was rejected.

But Trump did get what he really wanted—lots and lots of publicity. His hugely hyped—and criminally underprepared—first summit with Kim in Singapore brought a week of nonstop news coverage. His later trip to the Demilitarized Zone, which included briefly walking inside North Korea, brought another wave of coverage. Trump even demanded that he receive the Nobel Peace Prize. This is showboating, not strategy.

The big issue in the realist case for Trump and Vance is that they will put Taiwan explicitly ahead of Ukraine in a ruthless prioritization of U.S. interests. As Andrew Byers and Randall Schweller write, Trump “understands the limits of American power.” From this perspective, the United States cannot reasonably hope to fight Russia and China simultaneously, much less a coordinated “axis” of those countries working with rogues such as Iran and North Korea. This notion is particularly connected with Vance, who has explicitly advocated abandoning Ukraine.

Yet Trump himself does not think this way. Trump’s supposed policy positions emerge on the fly as he speaks. He is lazy. He is not capable of the strategic thinking that realists want to attribute to him; one must only listen to his campaign speeches this year to see this. He routinely lies, makes up stories, and speaks in indecipherable word-salads. When Trump has spoken on Taiwan, he makes it clear that he sees it as just another free-riding ally that owes the U.S. protection money. In an interview with Bloomberg, Trump said the United States was “no different than an insurance company” and that Taiwan “doesn’t give us anything.”

It stretches psychological credulity to suggest that the United States under Trump will ruthlessly abandon a struggling, nascent democracy under threat by a fascist imperialist, but then abruptly fight for another new democracy under threat by an ever more powerful fascist imperialist. The prioritization of Taiwan over Ukraine misses the obvious precursor that the Middle East, in turn, is less valuable than Ukraine. But instead of reevaluating the United States’ position in the Middle East, Trump will almost certainly deepen U.S. involvement in the region because of the ideological fixations of his Christianist base.

The strategic case for elevating Taiwan over Ukraine is also far more mixed than Vance and Trumpian realists suggest.

First, China is much more powerful than Russia. So, a conflict with it would be far more destructive. The Russia-Ukraine war has been locally contained and, despite Russian bluster, not escalated to nuclear confrontation. That seems less likely in an open, U.S.-China war. It is an odd “realist” recommendation to suggest that the United States should take a provocative line against a stronger power, which increases the risk of great-power war, but not push its preferences on a weaker opponent where U.S. involvement is limited to a lower-risk proxy war.

Second, the U.S. commitment to Ukraine is much less costly than a parallel commitment to Taiwan. The United States is not fighting directly to defend Ukraine. It would have to do so to defend Taiwan. Taiwan defense would require the United States to project enormous force over a huge distance of open water at great expense—plus, there would be combat losses of major U.S. platforms, such as ships and aircraft.

By contrast, U.S. aid to Ukraine has mostly come in the form of money and midsized, ground-based platforms, totaling around $175 billion over two-and-a-half years. This is small and easily manageable because of NATO’s propinquity. U.S. national security spending is approximately $1 trillion annually; the country’s annual economic production is approximately $25 trillion. Notions that U.S. aid to Ukraine is an unsustainable overstretch, or that it is bolstering another “forever war,” are simply not correct.

In Ukraine, the United States is also using intelligence assets and coordination relationships with NATO allies that have long been in place—and resources that have little relevance to a Taiwan conflict. Washington is not going to engage the Chinese army in ground conflict, just as it does not need U.S. aircraft carriers to help Ukraine. As a specific example of a possible trade-off, Vance has suggested the United States lacks the artillery shell production capacity to meet both national defense needs and those of Ukraine. But that argument implies abandoning Ukraine today for an unidentifiable but apparently imminent U.S. ground war tomorrow.

Realist hopes for Trump and Vance assume an intellectual discipline that both men lack and elevate geopolitical trade-offs that are less acute than realists admit., Trump is lazy, unread, venal, easily bought, susceptible to autocrats’ flattery, captive to the ideological fixations of his domestic coalition, ignorant of U.S. strategic interests, and dismissive of alliances that amplify U.S. power. Vance is ostensibly more clear-eyed, but he is a foreign-policy neophyte in the pocket of Silicon Valley donors, including his mentor Peter Thiel. He has been a senator for less than two years, before which he was a financier and author whose interests were local.

The fiscal space to reorient U.S. defense spending is there. If Vance and Trump were truly serious about confronting China, they would not be proposing yet another massive Republican tax cut, for example. The traditional liberal internationalism Vice President Kamala Harris and President Joe Biden represent is far more likely to build a durable global coalition against Chinese and Russian revisionism than the venal caprice masquerading as strategy that Trump would bring back to the White House.

[robertreich]

Reversing the GOP Power Grab

Amy Coney Barrett’s confirmation as the ninth justice on the U.S. Supreme Court is a travesty of democracy.

The vote on Barrett’s confirmation occurred just eight days before Election Day. By contrast, the Senate didn’t even hold a hearing on Barack Obama’s nominee, Merrick Garland, who Obama nominated almost a year before the end of his term. Majority leader Mitch McConnell argued at the time that any vote should wait “until we have a new president.”

Barrett was nominated by a president who lost the popular vote by nearly 3 million ballots, and who was impeached by the House of Representatives. With Barrett now on the court, five of the nine justices have been appointed by presidents who lost the popular vote.

The Republican senators who voted for her represent 15 million fewer Americans than their Democratic colleagues.

Barrett now joins 5 other reactionary justices who together will be able to declare laws unconstitutional, for perhaps a generation.

Barrett’s confirmation was the culmination of years in which a shrinking and increasingly conservative, rural, and white segment of the U.S. population has been imposing its will on the rest of America. They’ve been bankrolled by big business, seeking lower taxes and fewer regulations.

In the event Joe Biden becomes president on January 20 and both houses of Congress come under control of the Democrats, they can reverse this trend. It may be the last chance -- both for the Democrats and, more importantly, for American democracy.

How?

For starters, increase the size of the Supreme Court. The Constitution says nothing about the number of justices. The court changed size seven times in its first 80 years, from as few as five justices under John Adams to ten under Abraham Lincoln.

Biden says if elected he’ll create a bipartisan commission to study a possible court overhaul “because it’s getting out of whack.” That’s fine, but he’ll need to move quickly. The window of opportunity could close by the 2022 midterm elections.

Second, abolish the Senate filibuster. Under current rules, 60 votes are needed to enact legislation in that chamber. This means that if Democrats win a bare majority there, Republicans could block any new legislation Biden hopes to pass.

The filibuster could be ended with a rule change requiring a mere 51 votes. There’s growing support among Democrats for doing this if they gain that many seats. During the campaign, Biden acknowledged that the filibuster has become a negative force in government.

The filibuster is not in the Constitution, either.

The most ambitious structural reform would be to rebalance the Senate itself, as well as the Electoral College. For decades, rural states have been emptying as the U.S. population has shifted to vast megalopolises. The result is a growing disparity in representation.

For example, both California, with a population of 40 million, and Wyoming, whose population is 579,000, get two senators. If population trends continue, by 2040 some 40 percent of Americans will live in just five states, and half of America will be represented by 18 Senators, the other half by 82.

This distortion also skews the Electoral College, because each state’s number of electors equals its total of senators and representatives. Hence, the recent presidents who have lost the popular vote.  

This growing imbalance can be remedied by creating more states representing a larger majority of Americans. At the least, statehood should be granted to Washington, D.C.

The Constitution is also silent on the number of states.

Those who recoil from structural reforms such as the three I’ve outlined warn that Republicans will retaliate when they return to power.

That’s rubbish. Republicans have already altered the ground rules. In 2016, they failed to win a majority of votes cast for the House, Senate, or the presidency, yet secured control over all three.

Amy Coney Barrett’s ascent is the latest illustration of how grotesque the Republican power grab has become, and how it continues to entrench itself ever more deeply. If not reversed soon, it will be impossible to remedy.

What’s at stake is not partisan politics. It’s representative government. If Democrats get the opportunity, they must redress this growing imbalance – for the sake of democracy.  

[atheistforhumanity]

What To Do About The Supreme Court?

We find ourselves in a situation where a President who lost the popular vote has now appointed 5 judges on the Supreme Court, one of which under hypocritical circumstances. Now the court overwhelmingly leans to the Right, and many Americans are upset about both the numbers on the court and how it turned out this way. Before I discuss any solutions for this issue, I would like to take a moment to review what the judicial branch was imagined to be. 

In the Federalist Papers, essay 78, Alexander Hamilton argued that the judicial branch would be “an intermediate body between the people and the legislature, in order, among other things, to keep the latter within the limits assigned to their authority.” This has been the role of judicial bodies, just as Hamilton saw it. Hamilton also say the judicial branch as being mostly incapable of harming the liberty of the people, as it has no method of direct attack against either the legislative or executive branches. However, Hamilton specifically said, “so long as the judiciary remains truly distinct from both the legislative and the executive.”

Something to keep in mind is that this essay was written before the adoption of the constitution and long before we would make many amendments. It occurred to me that there are a few things that Hamilton could not have anticipated. The first is that the constitution itself was so incomplete from the start and left out so many citizens that had every right to be counted and protected. Therefore, he could not imagine how would want to change it and how different our values could be in the future. More importantly, Hamilton could not have anticipated the Age of Information, and the technology and education that come with it. It’s not unfair to say that these things have accelerated the progression of knowledge, debate, and societal values. Thirdly, I don’t believe Hamilton could have predicted the extreme partisanship that we live with today. 

All that being said, I believe our levels of partisanship and under maintained democracy have caused serious problems for the judicial branch. The Senate is the body that confirms judges, but due to population growth we have a Senate that does not accurately represent our people. For example, California alone has the same population as several mid-western states combined, yet California gets 2 senators while all those states can produce about 30 for the same population. Due to similar population disparities, our Electoral College has elected a President twice in recent history that lost the popular vote, and it is the President who chooses judges. If the Senate and even the President can so poorly represent the desires of the nation then the judicial branch ceases to be completely separate from the two other branches, because these mathematical inconsistencies only favor the Republican party. If the people who confirm judges are not of an accurate representation of the people, then judges cease to be intermediaries between legislators and the people, but rather they become insurance of the executive and legislative branch. 

So what are we to do in our current situation? Liberals are the only ones unhappy with the current conditions, because they all favor Conservatives. Right now, Democrats are discussing changing the size of the Supreme Court to even it out again. Given that supreme court judges enjoy a lifetime appointment, that would be the only way to immediate address the imbalance. 

I have only a couple things to say about this idea. The size of the court has not been changed in many years, but it is completely arbitrary and up to Congress. Therefore, changing it is not an unthinkable act. Regardless of size, all Americans should think hard about whether such an imbalanced court is democratic, whether it’s in your favor or not. Clearly the way we fill vacancies in the supreme court has nothing to do with fair consideration for the two major parties in America. It is more like a game show where luck is the most important. If the court were completely filled with Liberals, I would feel it would be the best situation morally, but if that happened I would think something is wrong with our system if our politics is supposedly 50/50 and our court doesn’t represent one side at all.

Do I think we should expand the court and place a number of liberals on the bench? Yes, for two reasons. The first is that Republicans have proved they care nothing for fairness with their treatment of Obama’s nominee and their rushed confirmation of Trump’s. Furthermore, Republicans regularly engage in gerrymandering and voter suppression, so I see no integrity in them. Second, Our partisanship has become so radical and the Republicans moved so far Right, that I believe it is a moral imperative to the American people to rebalance the courts and prevent the massive reversal of rights given to the people. Conservatives won’t agree, but I honestly don’t care. 

What is perhaps more important than the immediate size of the courts is the debate about term limits on justices. 

Alexander Hamilton argued for life appointments for the Supreme Court. He believed that giving them that type of independence would give them the power to stand for the constitution, separate from the other branches. He also thought that judges being permanent fixtures for the constitution would bring structure and order. The problem though is that society has never changed as rapidly as it has since the formation of America, especially over the past 100 years. If you look back in history from Hamilton’s perspective, legal and moral improvement has never moved as quickly as in the past 100 years. All the judges we recently lost on the supreme court over the past four years were selected decades ago, while the public has been going through a cultural and moral churning. 

In short, adding term limits to judges, especially the Supreme Court would be advantageous to the American people, while putting a check on legislators. That’s just how Hamilton imagined the court, as a power to protect the people from the overreaches of legislation. A reasonable term limit might be from 16 to 20 years. This is still a long time, but having a known end to someone’s duty should inspire hope in the people that a change is always just over the horizon. This would ensure that outdated and regressive ideas do not loom over our society at the highest level. 

Term limits are not a radical or new idea. The idea has been kicked around for years. It would be very easy to implement and would not drastically affect the way the court functions. I think this is the best long term solution to improve conditions for America. 

[collapsedsquid]

There is a widespread and bipartisan consensus that Americans are to blame for their current account deficit because the U.S. government spends too much and taxes too little. Robert Skidelsky, the noted biographer of John Maynard Keynes, complained in 2005 that “the United States has relied on other countries to adjust their economies to profligate American spending.” His suggestion was that the U.S. government “reduce domestic consumption” with some combination of tax increases and spending cuts. George P. Shultz and Martin Feldstein, two former officials from the Ronald Reagan administration, echoed Skidelsky’s view in 2017. According to them, “Federal deficit spending, a massive and continuing act of dissaving, is the culprit” for America’s trade imbalances. Their solution is to “control that spending.” Just a few months later, Jason Furman, a former chairman of the Council of Economic Advisers under President Barack Obama, argued in 2018 that “to prevent the trade deficit from growing, the United States should increase national savings” by “cutting the federal budget deficit.” Furman suggests that Americans should “stop blaming others and start examining ourselves.” Joseph Stiglitz, a left-wing Nobel-winning economist, has also chimed in, claiming that “America has been saving too little” and that the best way to rebalance U.S. trade is to “increase national savings” by cutting consumption spending.

Remember that they hate your fucking guts.

[berniesrevolution]

IN THESE TIMES

Throughout our 42-year history, In These Times has often played the role of Cassandra. Perhaps the most unhappy instance is our prediction of the burst of the housing bubble, and the devastating foreclosure crisis that followed. In his 2003 article, “Bursting Bubbles,” economist Dean Baker warned that the popular progressive explanation for the 2001 recession was wrong. Bill Clinton may have boasted in 2000 of “the best economy in 30 years,” but George W. Bush’s disastrous tax cuts and military profligacy only partly explained the subsequent slump.

The Clinton-era economic boom, Baker wrote, “was built on three unsustainable bubbles”: the stock bubble, which had already burst, and the dollar and housing bubbles, which were sure to. It was these bubbles, Baker argued, “that created the basis for the 2001 recession and the economy’s continuing period of stagnation.” Baker predicted that the housing bubble had reached its peak, with troubling consequences. The rise in home prices was outpacing inflation, and families were counting on that rise in home values to offset high unemployment and stagnant wages. The result was skyrocketing mortgage debt:

This situation is frightening for two reasons. First, as a short-run matter, if housing prices fall sharply in some of the areas where the effects of the bubble are largest (for example the Boston, New York, Washington, and San Francisco areas), new home buyers (and those who recently refinanced their mortgages and took money out) could find they have negative equity in their homes.

If someone borrows $270,000 to buy a $300,000 home, and the price falls by one-third, this leaves them owing $70,000 more than the home is worth. When this happens, there is a huge incentive to just let the mortgage holder foreclose on the home. If this were to happen on a large scale, the survival of many banks and financial institutions would be at risk.

That’s just about exactly what came to pass: Five years later, amid skyrocketing foreclosures, some of our largest banks and financial institutions collapsed.

In December 2008, as an accountability-free bailout was underway, David Moberg called for an economy “beyond casino capitalism.” That would entail financial reforms including the banning of many types of derivatives and the creation of a financial products public safety committee, stricter capital reserve requirements on banks, and a global financial transaction tax. But “fixing the casino economy involves more than better control over capital markets,” Moberg wrote. “There’s also a need to rebalance the real economy.” That included immediate relief for underwater homeowners, as well as a robust federal investment plan:

A massive stimulus plan is also needed. But to create new jobs, it should downplay tax breaks and instead invest in infrastructure repair and new construction, support hard-pressed state and local governments, provide more money for education aid and basic research, and lead an energy efficiency campaign, with public and private employers retrofitting homes and public buildings.

Ten years later, as you probably know, we haven’t gotten around to doing most of these things on any meaningful scale. An $800 billion stimulus package under Barack Obama did create an estimated 3.3 million jobs, but it was too small to spur a sustained recovery and was quickly followed by a downward spiral in public investment. Those reforms that we did implement—imposing stricter capital requirements, for example—are being rapidly undone by the Donald Trump administration.

(Continue Reading)

[orbemnews]

The global chip shortage has come for iPads and Macs What’s happening: Apple (AAPL) just had a massive quarter thanks to sales of new iPhones, iPads and MacBooks, with revenue nearly hitting $90 billion. Sales of iPhones reached nearly $48 billion, a 65% increase over the same quarter last year, as consumers continued shelling out the big bucks to upgrade to Apple’s first 5G smartphone lineup. But that wave of demand is now coming up against major supply chain issues resulting from the pandemic. In a call with analysts, Apple Chief Financial Officer Luca Maestri said that the company expects revenue will be $3 billion to $4 billion lower this quarter thanks to “supply constraints.” That includes problems procuring chips, which are expected to affect the production of iPad and Macs. “We’ll have some challenges in there, and challenges in meeting the demand that we’ve got,” CEO Tim Cook said on the call. Apple shares are still up nearly 3% in premarket trading. Remember: Carmakers were among the first to sound the alarm about a shortage of microchips, which forced companies including General Motors (GM), Hyundai (HYMTF), Ford (F) and Fiat Chrysler (FCAU) to temporarily shut down plants. On Wednesday, Ford warned that the chip shortage will get worse before it gets better, and will likely cut 2021 profits by about $2.5 billion. Now, even top tech companies are dealing with the fallout. Samsung (SSNLF) told analysts on its earnings call Thursday that it’s working hard to rebalance production to reduce shortages of semiconductors and other key parts, which could weigh on sales of products like smartphones. Big picture: While the pain has spread from autos to consumer electronics, it won’t stop there. In a research note published last week, Goldman Sachs said that 169 US industries embed semiconductors in their products. The bank said its “working assumption” is that there will be a 20% average shortfall of computer chips for those affected. The problem isn’t going away anytime soon. “Because of the proprietary technologies, specialized machinery, and economics of scale needed to produce any given type of computer chip or component — and because many of the mature facilities are already operating near full capacity — the imbalance is likely to persist into the fall and possibly into 2022,” the bank’s analysts wrote. Investor insight: Wall Street is tracking how shortages could hurt corporate earnings, but it’s also trying to puzzle out what they mean for inflation, which is being closely monitored by central banks. A reduction in supply, as fewer cars and tablets are produced, could contribute to higher prices. Goldman Sachs thinks the price of affected products could rise by 0.7% to 3% this year, providing a “temporary” boost to inflation readings. Biden at 100 days: Hottest stock market since JFK The Biden bust that the Trump campaign warned of has morphed into a Biden boom, my CNN Business colleague Matt Egan reports. See here: The S&P 500 is up 8.6% since the market close on Jan. 20, the final day of the Trump presidency. That means President Joe Biden is on track for the strongest stock market performance during a new president’s first 100 days since John F. Kennedy in 1961, according to CFRA Research. The Biden rally squeaks past the 8.4% jump during the first 100 days of the Obama presidency and is well above the 5% increase in the months following former President Donald Trump’s inauguration. Friday will mark Biden’s 100th full day in office, not counting Inauguration Day. Presidents tend to get more credit — and more blame — than they deserve when it comes to the stock market’s performance. Still, the historic gains at the start of the Biden era add to a sense of optimism about America’s recovery from a once-in-a-century pandemic. “If the stock market is any indication, Wall Street appears to approve of President Biden’s attempts to corral the Covid-19 crisis and stimulate the economy,” Sam Stovall, CFRA’s chief investment strategist, told CNN Business. Remember: The US stock market recovered from the pandemic long before the election, boosted by unprecedented support from the Federal Reserve and Congress. Markets gathered momentum last fall as election chaos scenarios were avoided. Wall Street, like Main Street, cheered vaccine breakthrough announcements in November that helped fuel the Dow’s best month since January 1987. Stocks have continued to rally in 2021 as the rapid rollout of vaccines raises hopes for an economic boom. History suggests the stock market has a good chance of finishing the year in the green. Since 1932, only once did the S&P 500 end the year in the red after rising during the first 100 days of a presidential term, according to Randy Frederick, vice president of trading and derivatives at Charles Schwab. But that will require investors to continue to shrug off concerns about the virus, inflation and higher taxes. In a speech before a joint session of Congress on Wednesday, Biden reiterated his intention to raise taxes on the wealthy to pay for trillions of dollars in fresh spending on infrastructure and education. “It’s time for corporate America and the wealthiest 1% of Americans to pay their fair share,” he said. The Declaration of Independence is going public A copy of the Declaration of Independence will hit the sizzling collectibles market just in time for the Fourth of July — and unlike other rare items up for sale, you don’t have to be a millionaire to own a piece of it. Rally, a trading app for classic cars, baseball cards and other memorabilia, will next month offer 80,000 shares to the public of a copy of the Declaration of Independence printed in July 1776. The item is one of just 20 copies from that period that are in private hands. It was previously displayed at the National Constitution Center in Philadelphia. Each share will cost just $25, making it a $2 million initial public offering. The IPO comes during a surge of interest in collectibles, with everything from art to sneakers to sports cards skyrocketing in value. A LeBron James rookie card sold for a record $5.2 million earlier this week. And the explosion of digital certificates for art and collectibles known as non-fungible tokens, or NFTs, has been grabbing headlines. The rush has been triggered in part by central bank policy, which Federal Reserve Chair Jerome Powell indicated Wednesday was not changing any time soon. With interest rates at rock bottom, investors are looking for ever more creative places to park their cash. “People are trying to get protection from the debasement of their dollars,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group. “They want to be in things with limited supply and that have the perception of value in the eyes of many.” Up next Altria (MO), Carlyle Group (CG), Caterpillar (CAT), Comcast (CCZ), Domino’s Pizza (DMPZF), Hershey Foods (HSY), Kraft Heinz (KHC), Mastercard (MA), McDonald’s (MCD), Merck (MKGAF) and Molson Coors (TAP) report results before US markets open. Amazon (AMZN), Twitter (TWTR) and US Steel (X) follow after the close. Also today: The first look at US gross domestic product for the first three months of the year posts at 8:30 a.m. ET, along with initial unemployment claims for last week. Coming tomorrow: Chevron (CVX) and ExxonMobil (XOM) close out a big week of earnings from oil producers. Source link Orbem News #Chip #Global #investing #iPads #Macs #Premarketstocks:TheglobalchipshortagehascomeforiPadsandMacs-CNN #shortage

[dipulb3]

The global chip shortage has come for iPads and Macs

New Post has been published on https://appradab.com/the-global-chip-shortage-has-come-for-ipads-and-macs/

The global chip shortage has come for iPads and Macs

What’s happening: Apple (AAPL) just had a massive quarter thanks to sales of new iPhones, iPads and MacBooks, with revenue nearly hitting $90 billion. Sales of iPhones reached nearly $48 billion, a 65% increase over the same quarter last year, as consumers continued shelling out the big bucks to upgrade to Apple’s first 5G smartphone lineup.

But that wave of demand is now coming up against major supply chain issues resulting from the pandemic. In a call with analysts, Apple Chief Financial Officer Luca Maestri said that the company expects revenue will be $3 billion to $4 billion lower this quarter thanks to “supply constraints.”

That includes problems procuring chips, which are expected to affect the production of iPad and Macs.

“We’ll have some challenges in there, and challenges in meeting the demand that we’ve got,” CEO Tim Cook said on the call. Apple shares are still up nearly 3% in premarket trading.

Remember: Carmakers were among the first to sound the alarm about a shortage of microchips, which forced companies including General Motors (GM), Hyundai (HYMTF), Ford (F) and Fiat Chrysler (FCAU) to temporarily shut down plants.

On Wednesday, Ford warned that the chip shortage will get worse before it gets better, and will likely cut 2021 profits by about $2.5 billion.

Now, even top tech companies are dealing with the fallout.

Samsung (SSNLF) told analysts on its earnings call Thursday that it’s working hard to rebalance production to reduce shortages of semiconductors and other key parts, which could weigh on sales of products like smartphones.

Big picture: While the pain has spread from autos to consumer electronics, it won’t stop there. In a research note published last week, Goldman Sachs said that 169 US industries embed semiconductors in their products. The bank said its “working assumption” is that there will be a 20% average shortfall of computer chips for those affected.

The problem isn’t going away anytime soon.

“Because of the proprietary technologies, specialized machinery, and economics of scale needed to produce any given type of computer chip or component — and because many of the mature facilities are already operating near full capacity — the imbalance is likely to persist into the fall and possibly into 2022,” the bank’s analysts wrote.

Investor insight: Wall Street is tracking how shortages could hurt corporate earnings, but it’s also trying to puzzle out what they mean for inflation, which is being closely monitored by central banks. A reduction in supply, as fewer cars and tablets are produced, could contribute to higher prices.

Goldman Sachs thinks the price of affected products could rise by 0.7% to 3% this year, providing a “temporary” boost to inflation readings.

Biden at 100 days: Hottest stock market since JFK

The Biden bust that the Trump campaign warned of has morphed into a Biden boom, my Appradab Business colleague Matt Egan reports.

See here: The S&P 500 is up 8.6% since the market close on Jan. 20, the final day of the Trump presidency. That means President Joe Biden is on track for the strongest stock market performance during a new president’s first 100 days since John F. Kennedy in 1961, according to CFRA Research.

The Biden rally squeaks past the 8.4% jump during the first 100 days of the Obama presidency and is well above the 5% increase in the months following former President Donald Trump’s inauguration.

Friday will mark Biden’s 100th full day in office, not counting Inauguration Day.

Presidents tend to get more credit — and more blame — than they deserve when it comes to the stock market’s performance. Still, the historic gains at the start of the Biden era add to a sense of optimism about America’s recovery from a once-in-a-century pandemic.

“If the stock market is any indication, Wall Street appears to approve of President Biden’s attempts to corral the Covid-19 crisis and stimulate the economy,” Sam Stovall, CFRA’s chief investment strategist, told Appradab Business.

Remember: The US stock market recovered from the pandemic long before the election, boosted by unprecedented support from the Federal Reserve and Congress. Markets gathered momentum last fall as election chaos scenarios were avoided. Wall Street, like Main Street, cheered vaccine breakthrough announcements in November that helped fuel the Dow’s best month since January 1987.

Stocks have continued to rally in 2021 as the rapid rollout of vaccines raises hopes for an economic boom.

History suggests the stock market has a good chance of finishing the year in the green. Since 1932, only once did the S&P 500 end the year in the red after rising during the first 100 days of a presidential term, according to Randy Frederick, vice president of trading and derivatives at Charles Schwab.

But that will require investors to continue to shrug off concerns about the virus, inflation and higher taxes. In a speech before a joint session of Congress on Wednesday, Biden reiterated his intention to raise taxes on the wealthy to pay for trillions of dollars in fresh spending on infrastructure and education.

“It’s time for corporate America and the wealthiest 1% of Americans to pay their fair share,” he said.

The Declaration of Independence is going public

A copy of the Declaration of Independence will hit the sizzling collectibles market just in time for the Fourth of July — and unlike other rare items up for sale, you don’t have to be a millionaire to own a piece of it.

Rally, a trading app for classic cars, baseball cards and other memorabilia, will next month offer 80,000 shares to the public of a copy of the Declaration of Independence printed in July 1776.

The item is one of just 20 copies from that period that are in private hands. It was previously displayed at the National Constitution Center in Philadelphia. Each share will cost just $25, making it a $2 million initial public offering.

The IPO comes during a surge of interest in collectibles, with everything from art to sneakers to sports cards skyrocketing in value. A LeBron James rookie card sold for a record $5.2 million earlier this week. And the explosion of digital certificates for art and collectibles known as non-fungible tokens, or NFTs, has been grabbing headlines.

The rush has been triggered in part by central bank policy, which Federal Reserve Chair Jerome Powell indicated Wednesday was not changing any time soon. With interest rates at rock bottom, investors are looking for ever more creative places to park their cash.

“People are trying to get protection from the debasement of their dollars,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group. “They want to be in things with limited supply and that have the perception of value in the eyes of many.”

Up next

Altria (MO), Carlyle Group (CG), Caterpillar (CAT), Comcast (CCZ), Domino’s Pizza (DMPZF), Hershey Foods (HSY), Kraft Heinz (KHC), Mastercard (MA), McDonald’s (MCD), Merck (MKGAF) and Molson Coors (TAP) report results before US markets open. Amazon (AMZN), Twitter (TWTR) and US Steel (X) follow after the close.

Also today: The first look at US gross domestic product for the first three months of the year posts at 8:30 a.m. ET, along with initial unemployment claims for last week.

Coming tomorrow: Chevron (CVX) and ExxonMobil (XOM) close out a big week of earnings from oil producers.

[megalium]

Biden needs balance and engagement in Asia with China

Responsible adults are back in the White House. President Joe Biden sent a clear message in his inauguration that his priority is to heal a divided United States of America. He went on to immediately sign a series of executive orders including one that has the United States rejoin the Paris climate agreement.

So begins the hard yards of repairing America’s international standing and undoing the damage from four years of Donald Trump’s America First agenda. The United States didn’t just vacate global leadership for four years but was itself a source of uncertainty and instability. The domestic sources of America First persist with inequality and division magnified by failure to manage the response to the COVID-19 pandemic.

Whether Mr Biden and his administration can reclaim global leadership while attending to America’s great domestic fractures is still a question.

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The biggest challenge on the international stage will be managing the China relationship. The United States has never faced a big power rival like China that already has a larger economy by some measures and is deeply integrated into the global economy.

China policy under President Trump — to be tough on China, frame it as a strategic rival and start to decouple the economies — had a large measure of bipartisan support. Secretary of State-designate Antony Blinken emphasised continuity on China policy in his senate confirmation hearings. But there will be differences. Where a Biden administration will differ most is on how it engages allies and partners in its strategy.

The Biden administration is starting to reveal its thinking on China and Asia policy. Kurt Campbell, Mr Biden’s ‘Asia tsar’ and the architect of President Obama’s Asia pivot (later rebranded the Asia rebalance), has outlined a strategy of working with allies to curb China’s assertive behaviour and restore balance and legitimacy to the Asian order. This is a welcome departure from the Trump administration that undermined alliances.

Mr Campbell’s strategy reveals two important gaps that are difficult to address yet. How will the United States engage China directly, and how will the coalition of allies and partners work with both the United States and China?

Any engagement between China and the United States involves spillovers for the rest of the world. Mr Trump’s transactional, bilateral, divide and conquer approach to foreign policy led to the phase one trade deal with China that eschewed multilateral trade rules and norms. The deal involved significant negative spillovers for the rest of the world as it diverted Chinese trade away from others like Australia towards US goods and gave special access to US companies in China that unilateral US sanctions had cut out for competitors from other countries.

The United States will need to find a way to engage China to pursue its global interests — from climate change to global economic governance — that avoids damage to the rest of the world. The global community needs to push China and the United States towards settlements in multilateral settings.

Mr Campbell suggests using an alliance of democracies or coalitions of the willing to counter Chinese assertiveness and curb Chinese behaviour. He will find many willing partners. But if those coalitions do not include engagement with China on win-win or positive sum issues like trade and investment, the willing partners will be fewer.

Few countries will have much appetite for being forced into a choice between China and the United States, a strategy that Mr Trump’s secretary of state Mike Pompeo pursued overtly. China is much too important to many countries around the world for their economic and political security. It will become more important as a source of recovery from the pandemic and to East Asia in particular after the conclusion of the Regional Comprehensive Economic Partnership (RCEP) agreement.

Mr Biden’s advisors are already finding the balance a challenge, letting it be known they are unhappy with the European Union for concluding an investment deal with China before the Biden administration was in place. National Security Advisor Jake Sullivan tweeted: ‘The Biden-Harris administration would welcome early consultations with our European partners on our common concerns about China’s economic practices’.

Asia tsar Campbell went further in his Foreign Affairs article suggesting that Europe is out of step with the Indo-Pacific approach because ‘distant European leaders are inevitably less concerned about China’s assertiveness than the Indo-Pacific states next door’ and ‘China used last-minute concessions to successfully pull the EU into a major bilateral investment agreement despite concerns that the deal would complicate a unified transatlantic approach under the Biden administration’.

In this week’s lead article, Shiro Armstrong and Evgeniia Shannon argue that the Comprehensive Agreement on Investment (CAI) between China and the European Union is ‘a positive development’ and ‘makes clear that Europe will not sit quietly on the sidelines without pursuing its own strategic interests’ in the tussle between China and the United States.

It’s not just Campbell and Sullivan. ‘The CAI is being portrayed in Western media as a strategic victory for China over a naive, desperate Europe’, Armstrong and Shannon point out. ‘Europe’s leaders, critics argue, are limiting options for the Biden administration and giving too many concessions to China with little hope it will honour its commitments’.

China will be locked into more rules and markets through RCEP and the CAI, and, Armstrong and Shannon explain, that ‘significantly raises the costs of Chinese unilateral behaviour that contravenes those agreements’. That is something the United States should welcome.

If the CAI comes into force, the European Union will succeed in locking in major Chinese reforms and concessions, some of which extend beyond those that European investors will enjoy. Chinese investors in Europe will gain certainty while European hosts can still screen investments for security purposes.

Chinese President Xi Jinping has also signalled interest in joining the Trans-Pacific Partnership, which would require fundamental reform to state-owned enterprises for any chance at Chinese membership. Chinese reforms and opening up are unequivocally good for China and also for the global community.

America under Biden will take on the China challenge with other countries but unless it finds ways to engage China that don’t damage the interests of allies and finds a way to give allies and partners space to engage with China on reasonable terms, it may find America First will become America Alone.

The EAF Editorial Board is located in the Crawford School of Public Policy, College of Asia and the Pacific, The Australian National University.

[bbcbreakingnews]

China ‘threat’ won’t Biden admin’s Indo-Pacific strategy

NEW DELHI: In 2009, India and US began their first official-level dialogue on China and the Asia-Pacific. The Indian side was represented by Gautam Bambawale, then joint secretary in MEA and the US by the assistant secretary, Kurt Campbell. Over the next couple of years, Campbell and Bambawale explored the growing convergences in their respective foreign and security policies for this region. “That dialogue, the first of its kind between the US and India, set the stage for the 2015 Vision Statement between India and US,” said Bambawale. The Japan-India-US trilateral grouping began under their watch, which later became a summit-level exercise. Kurt Campbell is due to be named the Indo-Pacific coordinator by US president-elect Joe Biden, and in that role, is likely to oversee the Biden administration’s approach to China and building up the Indo-Pacific policy. While Campbell may have started the ball rolling in the first Obama administration, the second Obama administration did not give that measure of importance to the “pivot” or “rebalance”. For instance, the US gave China a pass over the PCA verdict on the South China Sea in 2016. Campbell’s successor in the State Department, Danny Russel, stopped the East Asia dialogue with India as well. But in the past four years, the Trump administration sharpened the US view of China, effectively tearing up the conventional belief that a prosperous Beijing would inevitably be a more liberal China. As China doubled down on socialism under Xi Jinping, its aggressive moves in the region became a greater cause for concern. The US has taken to sanctions, a trade war, visa restrictions and 5G bans, openly challenging the Chinese regime. The pandemic in 2020 only intensified the open opposition between the US and China. In its dying days, the Trump administration this week lifted the curbs on diplomatic contact with Taiwan, something that may have been fraying, but had been maintained as the proverbial fig leaf. This week, the Trump White House also declassified its Indo-Pacific strategy as well as the notes of the former deputy national security adviser, Matt Pottinger. However, it seems fairly clear that Biden’s Indo-Pacific strategy will not be very different from Trump’s. As Campbell and Doshi say in an essay in Foreign Affairs this week, “A strategy for the Indo-Pacific today would benefit from incorporating three lessons from this episode of European history: the need for a balance of power; the need for an order that the region’s states recognize as legitimate; and the need for an allied and partner coalition to address China’s challenge to both. Such an approach can ensure that the Indo-Pacific’s future is characterized by balance and twenty-first-century openness rather than hegemony and nineteenth-century spheres of influence.” Campbell will find many familiar faces in New Delhi, as will the new CIA chief, William Burns. In addition, the possible appointment of Ely Ratner possibly in the Pentagon as rumoured, and Rush Doshi in the National Security Council to head China policy, would be a sign of reassurance in New Delhi. For many looking in at the Biden administration, Campbell may also balance John Kerry who, as Biden’s special envoy on climate change, could be tempted to make concessions to China, as many Indian analysts have feared, particularly as climate change is sought to be part of the new National Security Council. Meanwhile, Washington insiders say Ely Ratner’s appointment may make up for the new defence secretary’s lack of Asia (read China) experience. India is invested heavily in the Indo-Pacific, the trilateral and the Quad — an investment that has only intensified in the past couple of years. Campbell’s appointment would ease some of the apprehension in this part of the world that the new US administration may be softer on China.

source https://bbcbreakingnews.com/2021/01/14/china-threat-wont-biden-admins-indo-pacific-strategy/

[mariacallous]

There’s a rare bipartisan consensus in Washington that China’s rise must be countered in the strongest way possible. Democrats and Republicans seemingly compete over who can be tougher on Beijing.

The problem with the tone of the current debate, according to Cornell University professor and former State Department advisor Jessica Chen Weiss, is that policymakers are locked in an escalatory spiral. Anyone who seeks to diverge from the consensus is accused of having sympathy for the other side.

Weiss, a China specialist, worked on the State Department’s policy planning staff in 2021 and 2022. Since then, she has widely published her concerns, been cited in Foreign Policy articles, and been the subject of a New Yorker profile. Are her warnings valid? Is she accurately assessing the nature of China’s challenge? And if she is, how should policymakers adapt?

To find out, I interviewed Weiss on FP Live. Subscribers can watch the full interview on the video box atop this page. What follows is a condensed and edited transcript.

Foreign Policy: Let’s start with the obvious: What exactly worries you about America’s China policy?

Jessica Chen Weiss: The concern is that there are really two muscles here. One is the one that wants to outcompete and beat China, and then there is the one that asks “What do we stand for? What are we trying to achieve?” In my view, the former is really dominating our efforts and crowding out an affirmative, inclusive vision of the future that we’re trying to create.

I want to give the Biden administration credit for its China strategy, in which the first two pillars—invest at home, and align with our allies and partners—are essential components of success.

Compete, which represents the third pillar, really needs more work or it’s going to continue to veer toward conflict and will continue to place strain on the international order. Ultimately, it could potentially erode U.S. leadership. It’s good that the Biden administration is no longer trying to transform China, as National Security Advisor Jake Sullivan has written. That’s impractical and likely counterproductive.

Competition as a framework is silent on what it is that we are competing for and what is in and out of bounds as we try to compete. It means we’re frequently reactive. It means we’re frequently having trouble prioritizing which of the many things that one could react to is a real threat and needs to be addressed. It means that if you want to accomplish anything, whether you’re a politician or a bureaucrat, you tend to frame it in terms of countering or competing with China, and that creates incentives to just get even more hawkish rather than carefully assessing the shape of the challenge and the costs and benefits of different policy responses.

FP: How did we get here? I ask this because China’s rise isn’t exactly new.

JCW: It really began under the Obama administration as China became much more aggressive abroad and repressive at home, and that occasioned the beginnings of this rebalance in U.S. foreign policy, more towards deterrence and, remaining engaged, but nonetheless increasingly hedging against a more aggressive China.

It was really under the Trump administration that the U.S. assessment became especially extreme with words like the United States feeling that it was being “raped” by China and that [the] two were in an existential struggle. That really changed the terms of the conversation and made it very difficult in the context of our polarized politics.

When the Biden administration came into office, they had very little space to undo some of the more counterproductive measures that the Trump administration had put in place, because that would potentially open them up to being seen as unnecessarily soft on China and make it harder to do things like get key nominees confirmed.

FP: One could argue that the Biden administration has deployed more sober rhetoric than the previous administration, but the policies from both were certainly designed to hurt. Which of the two matter more, policy or rhetoric?

JCW: Both contribute and matter a lot because the rhetoric is oftentimes what the other side uses to point to as evidence of a much more hostile intent, even if the actions may or may not keep pace with those threats.

The behavior is ultimately what I think both sides look to, to see whether the threats, but also the assurances of the other side, are credible. Both sides in this atmosphere of intense distrust look toward the preparations that each side is taking, whether that is to stand on principle or to prepare for a potential conflict and sees that as evidence and its determination to use those capabilities for ill.

FP: Which U.S. policies specifically are counterproductive?

JCW: The tariffs are one such example, hurting American consumers and businesses as much as they are helping. They don’t seem to be moving the needle in terms of China’s economic practices that we continue to find objectionable.

Another area where I’m very concerned are the efforts to protect research security and look at all potential students and scholars as potential spies. That was the language of the previous administration, even though the policies were a little bit more targeted to screen for potential ties to entities that had affiliation with the Chinese military. The Biden administration has changed that language.

However, in talking with Chinese American or American scholars of Chinese origin or descent today, they feel that the climate is worse, that the Biden administration is just as determined, if not more, to prosecute. That’s creating a broader chilling effect here, and we are not seizing the opportunity to reverse some of the damage, to attract and retain talent from around the world.

FP: I’d like you to address a general critique of the argument you’ve been making. Several scholars say that there simply isn’t a basis for the cooperation you advocate for, because there’s no evidence that Beijing wants to reciprocate.

JCW: I have two ways of responding to that. The first is that we have to try, because the alternative is to take an increasingly fatalistic attitude toward the possibility of a crisis or conflict that would devastate the global economy, possibly lead to the deaths of many on the island of Taiwan, and tens of thousands of casualties on both sides.

The second is that, yes, it’s hard to find evidence on the Chinese side to reciprocate, but you might also from Beijing’s perspective look at the United States and say they see very little evidence that there’s anybody in the United States that’s interested in allowing China to become a respected equal on the world stage. This is a problem that requires thoughtful people to test the proposition of a more potentially moderate foreign policy on the part of Beijing. This is not about accommodating China. This is about finding ways reciprocally to reduce tensions in ways that wouldn’t require either side to fundamentally make concessions or even relinquish competition for decades to come. But the current trajectory that we are collectively on serves nobody’s interest. It is only raising the temperature and bringing forward a potentially avoidable crisis.

FP: Do the Chinese have a nuanced understanding of the shifts in American policy you’ve been describing from the Obama presidency through the Trump years and now to the Biden administration?

JCW: It’s something that they do track. There’s a tendency to privilege the most extreme voices on both sides. They tend to underweight those who take a more moderate, less zero-sum approach.

There is widespread recognition in China that domestic politics in the United States is leading to an increased tendency to stand tough against Beijing, and part of that then also leads to unconditional support for Taiwan. That’s one of the more dangerous dynamics that we are seeing today.

Part of the challenge here is creating an environment in which debate on both sides doesn’t come at the cost of perceived resolve, and once the relationship becomes increasingly adversarial, I think you’re going to continue to see that dynamic. For example, Representative Mike Gallagher at the opening hearing of the select committee hearing last week described this as an existential struggle on the seas, and that the [Chinese Communist Party (CCP)] posed a threat to life as we know it in the 21st century. But he also said that the CCP is counting on its friends in the United States to push back against their efforts. That is creating a framework in which anybody who wants to engage in a more rational, measured debate over China’s intentions and U.S. policy responses, is likely to be smeared or marginalized as somebody who is sympathetic to the CCP.

FP: Let’s flip the headline question we began with. Is China too consumed by competition with the United States?

JCW: I think it is. It is also one of the problems of the dynamic that we’ve described, where each side is increasingly engaged in going around the world, thwarting each other.

The burden is on decision-makers on both sides of the Pacific to put forward a more fulsome vision of an inclusive order where the two sides could agree to not necessarily always be engaged in trying to counter or undermine the other.

FP: Are there areas where Beijing perceives threats from the United States that may actually not be that scary?

JCW: The Chinese Communist Party believes that the United States is both intent on containing China—using Taiwan to that effect—and undermining the CCP. But the Biden administration is not intent on undermining the CCP or necessarily using Taiwan to that end. There are people who are quite outspoken here in the United States, some of whom, not too long ago, held power, in the Trump administration. It’s not paranoia, but we have to look at the balance of voices and what is the current constellation.

Right now, we do have a window of opportunity with the leadership in the United States and the Biden administration wanting competition without conflict and where you have in the Chinese leadership, at least currently with acute domestic problems, a genuine interest in stabilizing the relationship.

The current escalation, this tit-for-tat spiral that we’re in, serves nobody. The challenge here, on both sides, is breaking out of the mindset that deterrence is just about threats and threatening punishment. It’s not just about capabilities and hitting each other as hard as they can. It’s also about making those punishments conditional, which implies an assurance that if Washington doesn’t escalate or if Beijing doesn’t escalate, that both sides can expect a better outcome. And right now, that effort to invest in the credibility of threat is coming at the expense of the credibility of those assurances, and that is feeding this cycle. And that’s on Beijing as much as it is on Washington to make those kind of choices clear.

FP: What do other large countries like India or Indonesia or Nigeria think about the U.S.-China relationship right now?

JCW: Other countries around the world have been pretty clear in saying that they don’t want to choose between the United States and China, and they worry about a future in which the United States and China are simply measuring success in terms of defeating or getting the best of the other. That’s one of the reasons why I’ve suggested that the lodestar for U.S. policy has to be what we want rather than what we fear.

None of our allies and partners, let alone the rest of the world, want to see this relationship continue to spiral. Ultimately, if the Unites States is to forge a broader coalition, we need to ultimately make clear what it is that we are standing for because prioritizing competition and maintaining, as Jake Sullivan said, an absolute rather than a relative lead over China, will introduce more friction between the United States and its allies and partners and the rest of the world.

This framing of global politics as being a struggle between autocracies and democracies makes it harder to build this more inclusive coalition, including one that tackles challenges that exist inside of autocracies. Governance is something that all leaders can want, regardless of the regime type in which they happen to lead. That framing also makes it harder to prevent competition from becoming more conflictual, pushing China and Russia closer together, for example, rather than encouraging limits to their cooperation.

FP: When you look at how U.S. politicians have been talking about Taiwan, and the broader U.S. policy on Taiwan, what’s your sense of what’s going wrong?

JCW: My sense here is that things are going wrong in part because there’s been this premium placed on symbolism over substance and the belief that to deter Beijing from attacking Taiwan is not only to marshal the capabilities, but also to talk tough.

The challenge here is that deterrence requires more than just threats. It requires credible assurances that we remain committed in the United States to maintaining the status quo. And that, of course, if China escalates it would pay significant costs. But also that if they don’t escalate, they don’t need to fear that the United States is headed inexorably toward recognizing Taiwan as an independent state.

What’s really crucial to recognize is that it’s not just military factors that are going to shape [Chinese President] Xi Jinping’s calculus. Despite being an authoritarian leader, Xi also faces potentially acute pressure domestically from other elites in the Politburo, but also online and in the public potentially to take decisive measures where the CCP is perceived to be on the cusp of “losing” Taiwan from their perspective. It’s critical that we deter, rather than provoke Beijing over Taiwan if we want to maintain the peace and stability that has served us all, and not least the people of Taiwan, for decades.

FP: How best should Washington deter Beijing? How do you raise the costs in a way that doesn’t lead us to war over Taiwan?

JCW: Across the spectrum there are a lot of different things that we are and should continue doing. One of those is increasing the resilience of the U.S. military posture in the region, in coordination with allies and partners. It’s about increasing Taiwan’s resilience to economic coercion, including deepening economic as well as cultural ties to Taiwan, so that they don’t feel like there is no choice here, that that they have international support, but that we also be very clear that there are limits and that the United States would remain willing to accept any outcome that is peacefully arrived at without coercion, because it’s that prospect for some eventual evolution that could lead you to something that Beijing could call a reunification. That pathway has to exist, otherwise there’s nothing left in Beijing’s mind other than the military option, and that’s what we want to prevent.

As Ryan Hass and Jude Blanchette have argued, the best solution is no solution. We need to kick the can down the road, and that means threading the needle between things that substantively and meaningfully enhance the resilience of Taiwan’s defense and its economy. But it also means avoiding things like high profile visits that really make the island no safer today than it was before. If anything, the opposite: Polling shows the majority of residents in Taiwan think [then-U.S. House of Representatives Speaker Nancy] Pelosi’s visit brought more costs to Taiwan’s security than it brought benefits.

FP: But what you’re suggesting and proposing here would delay, not prevent, a potential war over Taiwan.

JCW: If you delay something in perpetuity, you’ve effectively prevented it.

FP: If you could advise policymakers watching this discussion on how to adapt U.S. policy towards China, what would you tell them?

JCW: I would suggest that we need to stand up a much more robust mechanism for evaluating the costs to Americans of many of the policies ostensibly designed to protect the United States. And oftentimes it’s phrased as, “We can run faster.” But increasingly, I think we’re trying to slow Beijing down.

My big concern is that efforts that we were taking to slow Beijing down are slowing ourselves down in the process. To me, the most urgent things that we need to do is to ensure that the United States remains committed to being a more inclusive democracy where diverse voices are heard and respected rather than a place in which we are increasingly so afraid that we hunker down, we squash dissenting views as unpatriotic or disloyal, and we become a shell of ourselves or repeat some of the abuses of the past.

Every time there has been an effort to compete with or counter an enemy that has been seen as existential, we’ve ended up undertaking policies here at home—from the internment of Japanese Americans to the hate crimes against Muslim and Sikh Americans—that have ended up doing more to undermine democracy than the adversary in the first place. So that is the most important thing that we could do, separate from the importance of continuing to assess very carefully the extent of China’s intentions, its capabilities, and the best U.S. policy response.

FP: You know, Jessica, since you’ve left government, you’ve become a sort of rallying figure for the argument that you’re making—basically a call for a more nuanced and moderate debate on China policy. Are you finding that people in power in America and elsewhere are responding to what you’re saying?

JCW: So many people have come forward. I’ve heard individually from people inside and outside the administration that they appreciate this call to think about what it is that we’re competing for. Where is this all going? And if we don’t like where this trajectory is pointing, what might we do today to imagine and work toward a different future?

And so I think that there really is appetite for this discussion. I hope that collectively we can come together across partisan party lines to identify what is the future that we want to be leading rather than solely thinking about trying to outcompete China. The frank reality is that we are among each other’s largest trading partners, and we’re not going to be able to meet our own objectives in the areas of decarbonization or the green energy transition without continuing to utilize some degree of inputs from China and Chinese companies. We’re just too integrated to be completely pulled apart. And so this idea that we are just going to defeat the other doesn’t really square with the reality that we exist in.

[robertreich]

How to Reverse the GOP’s Power Grab

Barring a miracle, Amy Coney Barrett will be confirmed on Monday as the ninth justice on the U.S. Supreme Court. 

This is a travesty of democracy.

The vote on Barrett’s confirmation will occur just eight days before Election Day. By contrast, the Senate didn’t even hold a hearing on Barack Obama’s nominee, Merrick Garland, who Obama nominated almost a year before the end of his term. Majority leader Mitch McConnell argued at the time that any vote should wait “until we have a new president.”

Barrett was nominated by a president who lost the popular vote by nearly 3 million ballots, and who was impeached by the House of Representatives. When Barrett joins the court, five of the nine justices will have been appointed by presidents who lost the popular vote.

The Republican senators who will vote for her represent 15 million fewer Americans than their Democratic colleagues.

Once on the high court, Barrett will join 5 other reactionaries who together will be able to declare laws unconstitutional, for perhaps a generation.

Barrett’s confirmation is the culmination of years in which a shrinking and increasingly conservative, rural, and white segment of the U.S. population has been imposing its will on the rest of America. They’ve been bankrolled by big business, seeking lower taxes and fewer regulations.

In the event Joe Biden becomes president on January 20 and both houses of Congress come under control of the Democrats, they can reverse this power grab. It may be the last chance -- both for the Democrats and, more importantly, for American democracy.

How?

For starters, increase the size of the Supreme Court. The Constitution says nothing about the number of justices. The court changed size seven times in its first 80 years, from as few as five justices under John Adams to ten under Abraham Lincoln.

Biden says if elected he’ll create a bipartisan commission to study a possible court overhaul “because it’s getting out of whack.” That’s fine, but he’ll need to move quickly. The window of opportunity could close by the 2022 midterm elections.

Second, abolish the Senate filibuster. Under current rules, 60 votes are needed to enact legislation in that chamber. This means that if Democrats win a bare majority there, Republicans could block any new legislation Biden hopes to pass.

The filibuster could be ended with a rule change requiring a mere 51 votes. There’s growing support among Democrats for doing this if they gain that many seats. During the campaign, Biden acknowledged that the filibuster has become a negative force in government.

The filibuster is not in the Constitution, either.

The most ambitious structural reform would be to rebalance the Senate, and thereby the Electoral College. 

For decades, rural states have been emptying as the U.S. population has shifted to vast megalopolises. The result is a growing disparity in representation, especially of nonwhite voters.

For example, both California, with a population of 40 million, and Wyoming, whose population is 579,000, get two senators. If population trends continue, by 2040 some 40 percent of Americans will live in just five states, and half of America will be represented by 18 Senators, the other half by 82.

This distortion also skews the Electoral College, because each state’s number of electors equals its total of senators and representatives. Hence, the recent presidents who have lost the popular vote.  

This growing imbalance can be remedied by creating more states representing a larger majority of Americans. At the least, statehood should be granted to Washington, D.C. And given that 1 out of 8 Americans now lives in California – whose economy, if it were a separate country, would be the ninth largest in the world -- why not split it into a North and South California?

The Constitution is also silent on the number of states.

Those who recoil from structural reforms such as the three I’ve outlined warn that Republicans will retaliate when they return to power.

That’s rubbish. Republicans have already altered the ground rules. In 2016, they failed to win a majority of votes cast for the House, Senate, or the presidency, yet secured control over all three.

Barrett’s ascent is the latest illustration of how grotesque the Republican power grab has become, and how it continues to entrench itself ever more deeply. If not reversed soon, it will be impossible to remedy.

What’s at stake is not partisan politics. It is representative government. If Democrats get the opportunity, they must redress this growing imbalance – for the sake of democracy.  

[khalilhumam]

The true size of government is nearing a record high

New Post has been published on http://khalilhumam.com/the-true-size-of-government-is-nearing-a-record-high/

The true size of government is nearing a record high

By Paul C. Light President Barack Obama entered office with the Great Recession raging and the true size of the federal workforce at about 10 million civil servants, postal workers, active duty military, contractors, and grantees. He raised the total with billions in economic stimulus to 11.3 million, then backed it down to about 9 million before leaving office. With the economy in full-throated rebound, Obama gave Donald Trump the rare opportunity to rebalance the federal government’s blended workforce. Despite campaign promises to the contrary, Trump opened the contract and grant spigots instead, adding more than 2 million jobs to the blended federal workforce, including 1 million in the Departments of Defense, Transportation, and Health and Human Services alone. Figure 1 shows the rise, fall, and rise again of the true size of government.[1] Despite Trump’s recent claim that the Pentagon brass was responsible for keeping the military-industrial complex “happy,” he has rarely missed an opportunity to celebrate his commitment to increased spending. According to a recent Washington Post analysis, under Trump’s tenure, the defense budget will have grown almost 30 percent by end of the 2021 fiscal year, even as estimated defense contract employment has surged by 20 percent. Although the Pentagon has been a grateful partner in the run-up, Trump has been front and center in keeping the defense industry happy. The Trump administration would likely argue that the blended workforce is essential to national security and economic growth—gone are the days, they might say, where federal arsenals could make weapons of war. The Trump administration might also add that America has relied on a mix of federal, contract, and grant employees to faithfully execute the laws since its first breath of independence in 1776. They even might note that contract and grant workforces are “at-will” employees of a kind who disappear when the contracts and grants end, although that would belie the reality of large corporations that are highly dependent on federal contracts for their survival. Despite its role in delivering on the government’s promises, the federal government’s blended workforce may have become a threat to the very delivery it guarantees. Convinced that the contract workforce was overpaid and guilty of “outright fraud” and “delay after delay after delay after delay,” Obama outlined a new insourcing process for bringing “inherently-governmental” jobs back into the federal inventory. He started in March 2009 by ordering the Defense Department to examine its contract workforce and ask whether the jobs would cost less and be better performed in-house and continued with Office of Management and Budget taskforce on “managing the multi-sector workforce.” Although the effort was soon abandoned as the defense industry marshalled its substantial lobbying power in opposition, the basic question of who should do what and for how much remains unanswered a decade later.[2] The next president must do better, if only because the world has become so complex and the war for talent so intense that Congress and presidents can no longer be sure that the right employees from the right sectors are in the right jobs at the right time at the right price and with the right skills. The next president must also ask whether the blending has unleashed the same forces that led President Dwight D. Eisenhower to warn of the military-industrial complex and its “acquisition of unwarranted influence, whether sought or unsought.” His warning focused on the “vast conjunction” of the armed services and the arms industry, but are equally relevant for the six federal-industrial complexes shown in Figure 2. Eisenhower’s military-industrial complex occupies 52 percent of the space in the figure, but the other five federal-industrial complexes have a significant influence in their own right.[3] The true size of the blended workforce is driven by a mix of demographic, bureaucratic, and political pressures that give contract- and grant-funded employees a faster hiring process, greater opportunities for advancement, greater responsibility earlier in career, access to further training and education, and insulation from executive-level tirades,  retirement cuts, and political interference. It is no surprise that federal employees trail private-sector employees on almost every measure of their work, including having sufficient resources to get their job done (-24%); saying their talents are well-used in the workplace (-19); they are satisfied with their jobs (-17%) and with their involvement in decisions that affect their work (-16%); are recognized for providing high-quality products and services (-15%); believe employees are encouraged to come up with new and better ways of doing things (-14 %) and have trust and confidence in their supervisors (-13%).[4] These pressures toward private- and grant-funded employees pale when compared to the biggest driver of all: the long-standing pressure to hold federal employment at or below 2 million. The cap was originally authored by Rep. Jamie Whitten (D-MS) in 1950 in an effort to limit spending as the Korean War roared. Called before the House Post Office Committee to explain his reasoning in 1954, Whitten said he had no ax to grind and might have won an award if he had just asked for a regular count and let the totals create the pressure. “I thought 2 million permanent folks out to be enough to have on a permanent basis,” he explained. “So what I did was fix appropriately 2 million as all the permanents we are going to have.” Casually established though it was, the amendment continues to work its will even after its repeal not once, but twice in the 1960s. Presidents and Congresses were more than willing to take a stand against big government through dozens of caps, ceilings, and freezes, including Trump’s recording-breaking 2017 budget freeze, but they could not find a way to count the contract and grant workforce. Viewed side-by-side, Figures 1 and 4 show the long-term effect of Whitten’s cap—steady federal employment over the years and wild swings across the contract and grant workforce.[5] The federal government will never break Whitten’s grip until Congress and the president develop a system for counting heads. In a political system where even small increases in the number of federal employees can trigger public outrage, the lack of parallel data on contract and grant employees undermines the thoughtful allocation of labor needed to ensure faithful execution of the laws. That was not Whitten’s intent, but it is easy to spot in too many federal breakdowns.

[1] The estimates of contact and grant employment were produced through a methodology designed by Eagle Eye Publishers in the early 2000s and refined Nation Analytics in the two most recent iterations of the approach. The estimates of growth come from federal government inventories of contract and grant spending. Each purchase carries a Northern American Industrial Classification (NAICS) code that provides detailed information on what was purchased and in what amount. This data is then analyzed using the U.S. Bureau of Economic Affairs RIMS III input/output model of the U.S. economy to determine the number of direct (prime), indirect (sub), and employment created the spending associated with each contract or grant. This analysis only includes direct and indirect spending. Although induced spending is one goal of federal stimulus spending, the jobs created are not directly accountable to the government. Appendix Table 1 provides the estimates of the true size of government, while Appendix Table 4 shows the source of gains among the departments that grew the most between 2017-2020. I am particularly grateful to Nick Taborek for his wise counsel and analysis in helping me extend my trend lines from previous periods. APPENDIX TABLE 1: THE SOURCES OF GROWTH, 2017-2020

2017 (In thousands)

2020 (In thousands)

FTE Change (In thousands)

% Gain/ Source of Growth 1.     Defense 3258 3869 611 19% Contracts 2.     Transportation 632 897 265 42% Grants 3.     HHS 636 828 192 30% Grants 4.     Veterans 624 709 85 14% Grants 5.     Homeland 390 489 99 25% Grants 6.     Energy 354 367 13 4% Mix 7.     Agriculture 160 197 37 23% Grants 8.     Interior 120 165 45 38% Grants 9.     Treasury 137 155 18 13% Civil Service 10.   NASA 134 151 17 13% Mix 11.   Commerce 105 134 29 28% Mix

[2] For further details on this battle, See Paul C. Light, The Government Industrial Complex: The True Size of the Federal Government, 1984-2018, New York, NY; Oxford University Press, 2019, chapter 4. [3] The domestic/industrial complex is composed of the departments of Agriculture, Education, Health and Human Services, Housing and Urban Development, Justice, Transportation, and NASA; the diplomatic/industrial complex is composed of the State Department and USAID; the Economic/Industrial complex is composed of the departments of Commerce, Treasury, Labor, and the Social Security Administration, the homeland/industrial complex is composed solely of the Department of Homeland Security only; and the environment/industrial complex is composed of the Energy and Interior departments and the Environmental Protection Agency. [4] These figures come from The Partnership for Public Service, “Overall Findings and Private Sector Comparison, 2019.” available at https://bestplacestowork.org/analysis/. The federal findings were based on answers from 615,000 federal employees surveyed by the U.S. Office of Personnel Management, while the private sector findings were based on a Mercer/Sirota database that consists of data from 6,450,000 respondents over five years (2014-2018). [5] Paul C. Light, The Government-Industrial Complex: Tracking the True Size of Government, 1984–2018, (New York: Oxford University Press, 2018), published in conjunction with the Volcker Alliance. 

[sarkarimirror]

Joe Biden former VP formally become The Democrat's Presidential nominee.

WASHINGTON: Former vice-president Joe Biden has formally become the Democratic presidential nominee to run for the White House against Republican President Donald Trump in the November elections. On Friday night, 77-year-old Biden took his tally of pledged delegates over the halfway mark of 1,991 from a total of 3,979, thus becoming eligible to earn the Democratic Party's presidential nomination. The veteran Democrat, who served as the 47th vice president of the United States from 2009 to 2017 during the presidency of Barack Obama, would formally be nominated at the Democratic National Convention in Wisconsin in August. In the presidential elections to be held on November 3, Joe Biden will challenge Republican incumbent Trump, 73, who is seeking re-election. Joe Biden has been consistently a votary for strong India-US relations. In 2008 as a Senator, he had voted to approve the landmark civilian nuclear deal between the two countries. During his visit to India in 2013, Joe Biden had said, "We want to deepen our strategic partnership on regional as well as global issues. The United States is elevating our engagement in the Asia-Pacific region. We refer to it as rebalance. "Twenty, even 10 years ago, some might have suggested that not have included India in these discussions. Today, India is an indispensable part of our rebalance toward the Asia-Pacific. Indians have looked east through travel and trade for a millennia. These ties are reemerging. India is negotiating a trade deal with ASEAN. It is becoming more involved in regional institutions. And that is good news for the region and for us." According to Real Clear Politics, which tracks all major national polls, Joe Biden is leading Trump by more than seven percentage points. However, Trump seems to be confident of pulling it off the States' elections. Read the full article

[georgecmatthews]

Post-crisis, the economic and political climate will likely be quite different

The world is changing. Investors can sense it. Pontificators are out, well, pontificating. While very few things are entirely certain, there are dominant threads emerging. The old world of the past decade is drawing to an end (thankfully). The next decade will be dominated by a few powerful secular themes:

A shift from deflationary threats to the resurfacing of inflation

Even more unruly, myopic and volatile international competition (with low collaboration)

A further retreat of liberal, meritocratic capitalism

The recent past (post Global Financial Crisis) was characterized by a financial world with:

low inflation and central banks’ fears of deflation

low (negative) interest rates as central banks employed unconventional tools to address deflationary fears

financial asset price inflation, elevated by such unconventional monetary policy

exacerbating inequality within countries as a result of concentration of asset ownership

weak growth, low bank returns (low asset yields and significant regulatory capital/liquidity burdens)

the failure of interest rates to boost capital formation, but instead an excessive amount of leverage placed on speculative assets (private equity, venture capital) and incentives to leverage corporate balance sheets (buybacks and debt)

capitalism struggles with low interest rates (and a speculative temperament) restraining “creative destruction,”, or players with real competitive advantages in terms of technologies, channels and others, while simultaneously funding “disrupters” with no clear path to profitability, but addicted to growth for growth’s sake

weakness in developing market (ex-China) currencies and economies as imbalances that are both external (volatile commodities, weak global trade) and internal (fiscal and credit) destroy the promises of growth

a significant outperformance of the dollar and US assets versus everything else

This all occurred against the backdrop of a social-political world of:

growing national chauvinism (read “populism”)

heightened sensitivities to inequality and the perception that the “rich are different than us”

an absence of global cooperation on existential issues (trade, immigration/refugees, nuclear proliferation, failed states, climate change, and obviously pandemics)

the retreat of an increasingly bellicose USA leadership

cultural/social civil war issues that distract presidents from delivering historical leadership

growing rivalries among great powers, particularly between the US and China

The new world dawning has been accelerated by this dreaded virus and its economic aftermath.

The new financial world will likely be characterized by:

the return of inflation led by unprecedented fiscal expansion during non-war eras

financial repression (regulation, exchange rates) designed to mitigate pressures

political intervention to address frustrations over “quality of opportunity” in liberal, “meritocratic” capitalism, with a retreat to post-war efforts to repair physical infrastructure and improve the quality of public services such as health care and education

a shift in policy focus from the spear of Quantitative Easing (monetary) to the club of MMT [Modern Monetary Theory] 1(fiscal), including the seductive possibility of universal basic income as a means to address deep frustrations with inequality and the falling real wages of the majority of the population in developed economies

a weaker dollar and a derating of US equities as interest rates (and potentially taxes) rise and corporate deleveraging responds to the bad last experience (illiquidity)

initial confusion over emerging market (EM) equities given fiscal/external frailties (Latam America, Sub-Saharan Africa) in risk-off drawdowns

eventual separation between China and “everything else” in the EM world

what we believe could be a major bull market developing in Chinese equities (and all assets)

This new world will exist against the backdrop of the social-political world characterized by:

the return of the Leviathan2, with a focus on greater equality in the developed world and an unwinding of the 30-40 year of “meritocratic capitalism,” amplified by perceptions of “socialism” for the rich (bailouts, monetary stimulus)

ever more turbulence in global cooperation as fading hegemony turns even more insular

the gap between global “commons” problems (climate, health, weak/failed states, nuclear proliferation) and global willingness and capacity to address these issues rises to a boil

the great power discord between China and the US is irresolvable, remaining an open wound

the European project hits the rocks again, like a failed marriage, over unwillingness to create a common fiscal framework and the inability of Southern European economies to rebalance through necessary devaluation

frustrations build around the US dollar as the reserve currency, while the US Federal Reserve does not have the political support to act responsibly as the lender of last resort in a volatile world of global capital flows and a result of the “weaponization” of the dollar during the Obama and Trump administrations, and its perceived violation of sovereignty by the victims (such as Iran, Russia, China, Turkey and others)

China emerges as THE singular growth engine and an equal with the US

China real growth over the next decade is led by powerful structural reform, improved capital allocation (higher returns, greater productivity) and consistent urbanization (the “hukou” reform seems to have not been appropriately digested by markets this past week3)

China’s currency, the renminbi, appreciates and brings much of Asia into its orbit

Figure 1: Investment themes have shifted drastically throughout past decades

Source: GaveKal, as of 06/30/2019. Investment conclusions for 2020 onwards are made by the blog’s author.

Conclusions to be drawn from these changed conditions

We believe the investment conclusions that can be drawn from these new circumstances are intuitive:

non-dollar assets will likely outperform US dollar assets

China could be the next BIG equity market story. (See Figure 1 for investment themes we believe have characterized recent decades and what could be the key theme over the next 10 years.)

EM economies ex-China will likely muddle through (as they always have done), but winners may have to contend with weak global trade growth and be committed to deep structural reform. (We anticipate Indonesia, Philippines, Peru, and Russia will be the leaders in this.)

The survivors will likely thrive as the economic crisis diminishes competition and presents opportunities for non-organic growth (benefiting companies like Kering, China Lodging, Yum China, Kotak Bank, Novatek).

Definitions

Modern Monetary Theory is a macroeconomic theory that says monetarily sovereign countries like the US are not operationally constrained by revenues when it comes to federal government spending.

Leviathan is a metaphor for state capitalism, or the widespread influence of the government in the economy.

Hukou is a system of household registration used in mainland China. The reforms are designed to allow people to move more freely inside the country. Specifically, on 4/9/2020, China’s Communist Party Central Committee and the State Council published new policy guidelines to further liberalize its economy in terms of land, labor and capital markets.

HOLDINGS DISCLOSURES:

As of 12/31/19, Kering SA, represented 5.09% of Invesco Oppenheimer Developing Market Fund’s Holdings; China Lodging, 0.0 %;  Yum China Holdings, 2.57%; Kotak Mahindra Bank, 2.83%; Novatek, 4.54%; IBM, 0.0%; AT&T, 0.0%; NTT, 0.0%; Bank of Tokyo-Mitsubushi, 0.0%, Industrial Bank of Japan, 0.0%, Microsoft, 0.0%, Exxon Mobil, 0.0%; General Electric, 0.0, NTTDocoMo; 0.0%; Petro China, X.X%; Apple, 0.0%; and Amazon, 0.0%.

As of 12/31/19, Kering SA, represented 0.00% of Invesco Oppenheimer Emerging Markets Innovators Fund’s Holdings; China Lodging, 0.0%;  Yum China Holdings, 3.25 %; Kotak Bank, 0.0%; Novatek, 0.0%; IBM, 0.0%; AT&T, 0.0%; NTT, 0.0%; Bank of Tokyo-Mitsubishi, 0.0%, Industrial Bank of Japan, 0.0%, Microsoft, 0.0%, Exxon Mobil, 0.0%; General Electric, 0.0%, NTTDocoMo; 0.0%; Petro China, 0.0%; Apple, 0.0%; Amazon, 0.0%.

Important information

Blog header image: Joseph Choi/ Stocksy

Foreign investments may be volatile and involve additional expenses and special risks, including currency fluctuations, foreign taxes, regulatory and geopolitical risks. Investments in securities of growth companies may be volatile. Emerging and developing market investments may be especially volatile. Eurozone investments may be subject to volatility and liquidity issues. Investing significantly in a particular region, industry, sector or issuer may increase volatility and risk.

The opinions expressed are those of the author as of April 14, 2020, are based on current market conditions and are subject to change without notice. These opinions may differ from those of other Invesco investment professionals.

This does not constitute a recommendation of any investment strategy or product for a particular investor. Investors should consult a financial advisor/financial consultant before making any investment decisions. Invesco does not provide tax advice. The tax information contained herein is general and is not exhaustive by nature. Federal and state tax laws are complex and constantly changing. Investors should always consult their own legal or tax professional for information concerning their individual situation. The opinions expressed are those of the authors, are based on current market conditions and are subject to change without notice. These opinions may differ from those of other Invesco investment professionals.

Holdings are subject to change and are for illustrative purposes only and should not be construed as buy/sell recommendations.

from Expert Investment Views: Invesco Blog https://www.blog.invesco.us.com/post-crisis-the-economic-and-political-climate-will-likely-be-quite-different/